Economics

Yesterday the Arizona Republic had an interactive foreclosure map and document of data (PDF) which includes the monthly foreclosure statistics for the last eighteen months: April 2007: 553 May 2007: 475 June 2007: 579 July 2007: 676 August 2007: 806 September 2007: 1,093 October 2007: 936 November 2007: 1,344 December 2007: 1,617 January 2008: 2,052 February 2008: 2,249 March 2008: 2,365 April 2008: 2,969 May 2008: 3,402 June 2008: 3,717 July 2008: 4,104 August 2008: 4,013 September 2008: 4,378 October 2008: 4,587 Total foreclosures per year: 2004: 4,444 2005: 1,370 2006: 1,070 2007: 9,920 2008: 33,836 through October This is not good news for a state where construction and real estate provide a large share of the employment opportunities. It is good news for those who do not own homes and have been waiting to buy at lower prices–it looks like next year will offer significantly better prices than this year, but there are still a lot of delusional sellers out there asking way too much. (There’s a two-bedroom, two-bathroom house on a half acre in a quiet neighborhood near us that looks very nice, but is probably worth about half of the $429,000 asking price, based on comparable sales and the current downward trend. Zillow says it’s worth $277,000.) See their summary article, which has links to the map and other documents. ...

When Rudy Giuliani was mayor of New York City, he had a zero-tolerance policy on graffiti, litter, and broken windows, on the assumption that small crimes like vandalism create an environment conducive to more serious crimes. Now, a study in the Netherlands published in Science provides support for this theory. In an alley used to park bicycles, the experimenters set up two conditions, one in which the walls of the alley were freshly painted and one in which they were tagged with graffiti. Flyers advertising a bicycle shop were attached to the handlebars of all parked bicycles. In the graffiti condition, 69% of bicyclists dumped the flyer on the ground as litter; in the clean condition, 33% littered. They performed several other similar experiments, and in each case the test subjects were more likely to engage in anti-social acts such as littering, trespassing, and stealing in the condition of disorder as opposed to in the condition of order. (Via The Economist, where you can read more details of the experiments.) ...

Gee, who was completely full of crap? I love the captions–Dow over 13,000 and Ben Stein is saying now’s the time to buy… Merrill Lynch a buy at $76, Charles Payne says buy Bear Stearns… they were delusional idiots. Schiff was right about everything except inflation and gold (at least so far–deflation looks like a bigger immediate risk than inflation). He was saying to buy gold at $830 in late 2007; it’s at about the same point today, but if you had taken his advice you could have sold higher earlier this year, and at least you wouldn’t have taken any real losses. (Hat tip to Brett Vickers for the video.) ...

October set a new record of 8,503 notices of trustee’s sales in Maricopa County, of which 900 were duplicates of previous notices. The number of pending foreclosures has dropped, as Bank of America cancelled numerous foreclosures after acquiring Countrywide. 3,516 foreclosures were cancelled in October, about double September’s rate. At the end of October, there were 27,874 pending foreclosures in Maricopa County. (Back in the summer of 2005, the total inventory of homes for sale was around 5,000. Today it’s around 50,000 34,000, which obviously has the potential to go much higher.) Trustee’s sales hit 4,587 in October, up from 4,378 in September. (Via azcentral.com.) UPDATE (November 26, 2008): Updated the inventory number to October 21, 2008, which is down from a peak of over 50,000, but which has been climbing back up from a recent low of just under 26,000 at the beginning of August 2008.

Here’s a nice set of graphs from the New York Times that shows various economic metrics by President and party majority in the Senate and House of Representatives. For the budget surplus vs. deficit, there seems to be a benefit to having one party in the presidency and another party in control of Congress. In general, it looks like Republicans in the presidency and the Senate produce bad results… (Via the Big Picture blog.)

The City of Phoenix’s “notes” newsletter for October 2008 (PDF), which comes with the water bill, features a story on the front page about its Glenrosa Service Center receiving the city’s first LEED Gold certification for its environmentally sound features, like being “build with wood from responsibly managed forests” and possessing “low energy and water use fixtures, non-toxic carpet and paint, energy-saving lighting sensors, native drought-resistant vegetation, dual-pane windows, an under-floor air distribution system and a heat-reflecting roof." Page two features an announcement that “The APS Fiesta of Light will kick off the city’s holiday activities this season with a long-time tradition–the APS Electric Light Parade.” This parade of “illuminated floats, marching bands, performance units [?] and helium balloons” has a theme of “Preserving a Family Holiday Tradition.” I wonder how many years of the Glenrosa Service Center’s energy savings will be expended this year in preserving that tradition. ...

Colorado College political science professor David Hendrickson has put together a nice resource at his new “Cause for Depression” blog: Think of it as a cartoon guide to the ongoing earthquake in the world of high finance. Through pictures, we will try to understand the dimensions of the current financial crisis–its origins and causes, its likely consequences, its potential remedies. The “Labels” in Blogspot allow us to construct a chapter organization that the reader should approach as she would a book. By hitting on the topics under “Labels,” the presentation will appear in an orderly fashion. Blogspot is not made for blogbooks, though it is easily adaptable to that purpose. Ordering within each of the chapters depends on time of posting, so my time stamps are not necessarily indicative of the actual time the material was posted. I have altered them to allow for an orderly presentation. If it seems to matter, I will post the date of composition and updates in the entry. The initial foray of posts was made in mid-October 2008. In seeking to understand the crisis, we need to begin with the credit mechanism. We are living through the bust of one of the greatest credit cycles of all financial history. In order get a handle on the seriousness of the bust, we must register the mania that fed the boom. We’ll first look at some measures indicative of the financial turmoil. Then we examine general conditioning circumstances: the role of the housing boom and bust, the general growth of credit market debt, the explosion in derivatives, all of which are relevant in considering how much insolvency exists within the financial system. That question–are our financial institutions insolvent?–in turn is vital in assessing the wisdom of various bailouts and rescues, the opportunity costs associated with the government-mandated maintenance of the “FIRE” sector (Financials, Insurance, Real Estate), and how the global imbalances that have marked the last fifteen years are likely to change. I conclude with some lessons. The final entry is a collection of paper topics for interested students to consider. Where possible, I’ve tried to indicate where readers can find updated sources of information for the material presented here. Given my harsh view of “derivatives,” I’m obliged to say that this compendium is almost entirely derivative. I’m deeply indebted to my blogroll for ideas, inspiration, and many of the charts contained herein. So, if you’ve read thus far, go now to “Financial Stress” in the “Labels” section.(Via Financial Armageddon.) The amount of public and non-public U.S. debt will inevitably come back down, one way or another. I just hope we don’t end up as a third-world nation (or worse yet, multiple third world nations) in the process.

IM conversation between two Standard & Poore’s employees, April 2007, as revealed in testimony before Congress today: Shannon Mooney: i didn’t really notice…but now that i think about it i kindof tune her out when she talks Rahul Dilip Shah: well she just is too political…and she doesn’t have anything of substance to say…but keeps thinking that she does. Rahul Dilip Shah: (I’m done venting now) :) Shannon Mooney: k go take a nap Shannon Mooney: see you later Rahul Dilip Shah: ok Rahul Dilip Shah: btw - that deal is ridiculous Shannon Mooney: i know right…model def does not capture half of the rish Shannon Mooney: risk Rahul Dilip Shah: we should not be rating it Shannon Mooney: we rate every deal Shannon Mooney: it could be structured by cows and we would rate it Rahul Dilip Shah: but there’s a lot of risk associated with it - I don’t personally feel comfy signing off as a committee member.(Via the Big Picture blog and The Epicurean Dealmaker. The latter has a pictorial illustration that I like, Mark Tansey’s “The Innocent Eye Test”; the former has links to the transcript.)

The Economist conducted a poll of 683 research associates of the National Bureau of Economic Research. 142 responded, of whom 46% self-identified as Democrats, 10% as Republicans, and 44% as neither. 80% of respondents, 71% of those who did not identify a political affiliation, and 46% of those who identified themselves as Republicans said that Obama has a better grasp of economics than McCain. (Only 23% of those who identified themselves as Republicans said that McCain had better understanding of economics.) 81% of respondents, 71% of the unaffiliated, and 31% of the Republicans said that Obama will pick a better team of economic advisors to run the country than McCain. The full results can be found at The Economist’s website. ...

An article at Time magazine suggests that those following the “prosperity theology” of some Pentecostal ministers are more likely than average to have obtained mortgages they cannot afford, leading to foreclosure: Has the so-called Prosperity gospel turned its followers into some of the most willing participants – and hence, victims – of the current financial crisis? That’s what a scholar of the fast-growing brand of Pentecostal Christianity believes. While researching a book on black televangelism, says Jonathan Walton, a religion professor at the University of California at Riverside, he realized that Prosperity’s central promise – that God will “make a way” for poor people to enjoy the better things in life – had developed an additional, dangerous expression during the subprime-lending boom. Walton says that this encouraged congregants who got dicey mortgages to believe “God caused the bank to ignore my credit score and blessed me with my first house.” The results, he says, “were disastrous, because they pretty much turned parishioners into prey for greedy brokers."Yet another case of religious trust being exploited to victimize those who have it. (Via Dispatches from the Culture Wars.) ...